The IRDAI (Insurance Regulatory and Development Authority of India) has dismantled the 4 year-old third party motor insurance pool blamed by private insurers for their losses.
The new plan provides an option to insurance companies to choose the liabilities they would bear totally,meaning they would pay up 100% of the claims.
Where they see high claims,such as on trucks,they can dip into the pool, where every insurer contributes depending on its market share.
According to the regulator IRDA said in a note on its website, ''The existing Indian third party motor pool shall be dismantled''
.
In India third party motor insurance pool, introduced in 2007, has been criticised by private insurers saying they are forced to bear the burden due to the sloppy due diligence done by public sector general insurers. But the state run insurers say their presence across the nation,even in smaller towns unlike private ones that cherry-pick customers in cities, make them vulnerable to disproportionate claims.
Earlier,everything was going to the pool It had become the biggest insurance company in itself. Efficiency of managing claims was low. Now,overall size will reduce and become equitable.
The latest move by IRDA will enable insurers to decide on whether they want to write the third party liabilities in a policy involving a Maruti car,or a Mercedes Benz,or a Tata truck. They could choose to pay up claims in cities where accidents may be less frequent, while transferring to pool those coming from hinterland, where there are more accidents.
This, in insurance parlance,is called declining risk pool. New India Assurance had plunged into losses last year for the first time in 91 years due to third party motor pool .The current pool is likely to see about 4 lakh claims this year (2011),and is forecast to get a contribution of around Rs. 5,400 crore. but is replacing it with a smaller one that may force state-run companies to improve efficiency.
Source: ET
The new plan provides an option to insurance companies to choose the liabilities they would bear totally,meaning they would pay up 100% of the claims.
Where they see high claims,such as on trucks,they can dip into the pool, where every insurer contributes depending on its market share.
According to the regulator IRDA said in a note on its website, ''The existing Indian third party motor pool shall be dismantled''
.
In India third party motor insurance pool, introduced in 2007, has been criticised by private insurers saying they are forced to bear the burden due to the sloppy due diligence done by public sector general insurers. But the state run insurers say their presence across the nation,even in smaller towns unlike private ones that cherry-pick customers in cities, make them vulnerable to disproportionate claims.
Earlier,everything was going to the pool It had become the biggest insurance company in itself. Efficiency of managing claims was low. Now,overall size will reduce and become equitable.
The latest move by IRDA will enable insurers to decide on whether they want to write the third party liabilities in a policy involving a Maruti car,or a Mercedes Benz,or a Tata truck. They could choose to pay up claims in cities where accidents may be less frequent, while transferring to pool those coming from hinterland, where there are more accidents.
This, in insurance parlance,is called declining risk pool. New India Assurance had plunged into losses last year for the first time in 91 years due to third party motor pool .The current pool is likely to see about 4 lakh claims this year (2011),and is forecast to get a contribution of around Rs. 5,400 crore. but is replacing it with a smaller one that may force state-run companies to improve efficiency.
Source: ET
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